Articles

Exploit Gold Collapse Using a Directional Calendar Spread

Exploit Gold Collapse Using a Directional Calendar Spread

Gold Directional Calendar We have used the relative calmness of the gold price in the last 18 months to successful sell LEAP 'covered calls' This has been a good strategy for us, but we need to rethink in the short term: Gold (GLD) has been falling dramatically over the past few days. Let’s see if we can exploit any further…
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Using an EBAY Backspread To Bet On Economic Strength

Using an EBAY Backspread To Bet On Economic Strength

The New Year has seen stock markets around the world rise on the back of encouraging signs for the US economy and a resultant switch from cash into equities by the large market players. Although we are mainly non-directional traders - we like to trade on non movement of stocks and/or volatility - we don't want to be too left…
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A new Gold LEAP call

A new Gold LEAP call

As discussed in this week's newsletter, we plan to complete our 'Apprentice' portfolio. For those new to the site we are building a portfolio of four LEAP call and hedged put trades. We have two on at present on UNP and IBM; detail and rational below: IBM UNP Anyway, we want to add a third: a LEAP call on GOLD via…
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Use A Broken Wing Butterfly To Capture VXX’s Down Drift

Use A Broken Wing Butterfly To Capture VXX’s Down Drift

In September I outlined a strategy for hedging against market volatility for little cost; even being paid to do so. This involved buying a longish term VXX call backspread and taking off if VXX hadn’t spiked within 3-4 weeks of expiration. (NB the VXX underwent a 1:4 split in October and so the prices quoted in the article should be multiplied by…
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Completing the ‘Apprentice’ portfolio

Completing the ‘Apprentice’ portfolio

Time to complete our Apprentice portfolio for those of you just starting out in your options education. We currently have a monthly hedged put trade (IBM) and a monthly LEAP ‘covered call’ (UNP); I’d like to put two more trades on over the next 10 days: a weekly hedged put trade and a weekly LEAP ‘covered call’. Then we will…
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How To Capitalize On Apple’s Subscription Model

How To Capitalize On Apple’s Subscription Model

This week Apple (AAPL) smashed through $700 despite what many commentators described as a disappointing iphone 5 launch. Why? And why is the new phone, supposedly only incrementally better than the 4S launched last year, selling so well? The reaction of technorati has been pretty overwhelmingly lukewarm to Apple's new product. There seems to have been a collective 'whatever...' from…
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Weeklies vs Monthlies

Weeklies vs Monthlies

I've been asked by a couple of members, by email and through our comments, about whether they should use weekly options rather than monthlies for our hedged put IBM trade. The short answer is that this is a valid strategy but I chose monthly cycles as they are easier to manage and I plan to do several of them (and don't…
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Hedged puts vs LEAPs

Hedged puts vs LEAPs

I've been asked a couple of times by members why we have used two different methods, hedged puts on our IBM trade but LEAPs on our recent UNP trade. Both rationales seemed the same: exploit a boring but rising stock over the long term. But we used one method from IBM (selling puts against a long term OTM put) and…
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Get on track with a Union Pacific LEAP ‘covered call’

Get on track with a Union Pacific LEAP ‘covered call’

Many people’s first experience of options trading is the covered call. It’s a relatively easy to understand extension to normal stock investing: buy stock and sell out of the money calls to boost ‘income’. There are a few problems with the strategy though. As I’ve noted elsewhere its actually more risky than it seems; it has the same risk profile…
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High risk, high return trade on Apple iphone 5 launch

High risk, high return trade on Apple iphone 5 launch

Two weeks ago we outlined a strategy to take advantage of the expected increase in Apple (AAPL) implied volatility (IV) and realized volatility – ie large stock moves – before the expected iphone 5 launch, using a medium term at the money (ATM) straddle. This was successful – we made a 14% gain in about a week – but it…
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